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August Busch should give it time...
Should August Busch IV, CEO, Anheuser-Busch (AB), accept the “fair-value” $65/share takeover offer from InBev? Well, let’s go by numbers and statistics here – AB is worth $43.98 billion on the NYSE today and commands 48.8% of the total beer market in US. In the opposition camp is InBev, which is offering a seemingly ‘fair’ $46.3 billion to its shareholders – a paltry premium of 5.3%! On July 6, 2008, AB has given an answer of sorts, by filing a case in a Delaware court against InBev on the grounds of the latter having made an illegal bid.
So should you, as the CEO, sell off your company, which controls nearly half of US beer market?! Yes and no! Surprised you must be, but what we mean is that AB should wait for some weeks till the offer price shoots northwards and the premium level is in the vicinity of 40%. [As per the June 2007 King’s College London (KCL) Report ‘Varieties of Capitalism, M&As’, the average premium given to US firms during domestic takeover has ranged between 40.8-56.6% between 1991-2006!] Agrees, Malcom Polley, President, Stewart Capital Advisors, “It could even rise up to $75/share;” that means a premium of 30.5% – considerable indeed!
The combined entity would have revenues of $36.4 billion and produce a total of 460 million hectoliters of beer annually. Carlos Brito, CEO, InBev comments, “We would draw on the collective expertise of both companies’ management and employees. We will create a stronger, more competitive, sustainable global company, which will benefit all stakeholders.” But his counterpart at AB terms these synergies as just, “profit enhancements”! Even Ann Gilpin, Analyst, Morningstar says, “InBev is run by machete-wielding investment bankers, who would love to get their hands on low-hanging fruit at AB.” But all’s not bad as B. Craig Hutson, CFA, Gimme Credit LLC asserts, “InBev has a presence in many more overseas markets than Busch, and it could use its global reach to expand the Busch portfolio.”
Chances of InBev don’t look bright as the KCL study proves that “the overall success rate of hostile bids is just 30.7%.” However, it’s all upto the AB shareholders now as even August Busch’s minor shareholding of 4.5% in AB won’t affect their decision. Surely, they have got to behave in a sober fashion now.
Sreoshi Ghosh
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
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August Busch should give it time...
Should August Busch IV, CEO, Anheuser-Busch (AB), accept the “fair-value” $65/share takeover offer from InBev? Well, let’s go by numbers and statistics here – AB is worth $43.98 billion on the NYSE today and commands 48.8% of the total beer market in US. In the opposition camp is InBev, which is offering a seemingly ‘fair’ $46.3 billion to its shareholders – a paltry premium of 5.3%! On July 6, 2008, AB has given an answer of sorts, by filing a case in a Delaware court against InBev on the grounds of the latter having made an illegal bid.So should you, as the CEO, sell off your company, which controls nearly half of US beer market?! Yes and no! Surprised you must be, but what we mean is that AB should wait for some weeks till the offer price shoots northwards and the premium level is in the vicinity of 40%. [As per the June 2007 King’s College London (KCL) Report ‘Varieties of Capitalism, M&As’, the average premium given to US firms during domestic takeover has ranged between 40.8-56.6% between 1991-2006!] Agrees, Malcom Polley, President, Stewart Capital Advisors, “It could even rise up to $75/share;” that means a premium of 30.5% – considerable indeed!
The combined entity would have revenues of $36.4 billion and produce a total of 460 million hectoliters of beer annually. Carlos Brito, CEO, InBev comments, “We would draw on the collective expertise of both companies’ management and employees. We will create a stronger, more competitive, sustainable global company, which will benefit all stakeholders.” But his counterpart at AB terms these synergies as just, “profit enhancements”! Even Ann Gilpin, Analyst, Morningstar says, “InBev is run by machete-wielding investment bankers, who would love to get their hands on low-hanging fruit at AB.” But all’s not bad as B. Craig Hutson, CFA, Gimme Credit LLC asserts, “InBev has a presence in many more overseas markets than Busch, and it could use its global reach to expand the Busch portfolio.”
Chances of InBev don’t look bright as the KCL study proves that “the overall success rate of hostile bids is just 30.7%.” However, it’s all upto the AB shareholders now as even August Busch’s minor shareholding of 4.5% in AB won’t affect their decision. Surely, they have got to behave in a sober fashion now.
Sreoshi Ghosh
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
Read these article :-
B-schooled in India, Placed Abroad (Print Version)
IIPM in Financial times (Print Version)
IIPM makes business education truly global (Print Version)
The Indian Institute of Planning and Management (IIPM)
IIPM Campus
ZEE BUSINESS BEST B SCHOOL SURVEY
IIPM to come up at Rajarhat
IIPM awards four Bengali novelists
The Hindu : Education Plus : Honour for IIPM
IIPM ranked No.1 B-School in India, Management News - By ...
IIPM Ranked No1 B-School in India
Moneycontrol >> News >> Press- News >> IIPM ranked No1 B-School in ...
IIPM ranked No. 1 B-school in India- Zee Business Survey ...
» IIPM ranked No1 B-School in India :: Education, Careers ...
The Hindu Business Line : IIPM placements hit a high of over 2000 jobs
Deccan Herald - IIPM ranked as top B-School in India
India eNews - IIPM Ranked No1 B-School in India
IIPM Delhi - Indian Institute of Planning and Management New Delhi ...
domain-b.com : IIPM ranked ahead of IIMs
IIPM makes business education truly global-Education-The Times of ...
